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June 1, 2011updated 12 Apr 2017 4:14pm

Catastrophe impacts prices

Euro Auctions MD Jonnie Keys provides a snapshot of the global market for heavy plant and machinery. Much has changed in the global market for used heavy plant and machinery in recent months An earthquake and tsunami has devastated large areas of north-east Japan, while unrest and conflict have spread across North Africa and the Middle East.

By Jonnie Keys

Photograph of digger

 

Euro Auctions MD Jonnie Keys provides a snapshot of the global market for heavy plant and machinery.

Much has changed in the global market for used heavy plant and machinery in recent months. An earthquake and tsunami has devastated large areas of north-east Japan, while unrest and conflict have spread across North Africa and the Middle East.

These catastrophic events have taken their toll on the local population and economy and will undoubtedly impact the global marketplace. In the face of such human catastrophe, analysing their economic effects may seem insensitive. However, it is clear these events will affect prices for heavy plant and machinery.

 

Cautious optimism – market in late 2010

By the end of 2010, manufacturers of heavy plant and machinery were feeling more confident. Manufacturers were again producing, although caution was still a byword with the global construction market still depressed. Mining was strong too.

At the end of 2010, stock levels were also still low. By that time, the cost of brand new equipment was 20% higher than prices in June 2009 and manufacturers were capitalising on market demand by hiking prices.

Good second-hand equipment in the UK is highly sought after, with owners hanging on to machines for longer than usual. Prices strengthened for late-used and nearly-new equipment – particularly in the 12-to-24 month class at auction.

Used plant is now seen as a global commodity – traded across the world where the demand is highest and the currency is strongest. When demand decreases, prices drop. When demand is high, prices hold strong. Add to this the lack of supply through decreased manufacturing and you have a volatile market.

 

North Africa stalls

From mid-June 2009 to late 2010, the North Africa market created the next trend with the demand for plant, machinery and equipment being extremely buoyant.

Increasing demand from countries in this region led to an improvement in buying prices at auction, as these new entrants developed an appetite for smaller excavators, dumpers and access equipment.

The high level of interest at auction came from countries, such as Libya, Egypt, Morocco, Iraq, Lebanon and Oman. The improvement in these markets was marked and it was anticipated these countries would continue to show eventual interest in larger pieces of equipment.

However, with the sad news of unrest in North Africa, demand for plant and machinery came to a grinding halt.

 

Mining up

The global demand for raw materials is driving the need for mining equipment. If it comes out of the ground we need it. From copper to coal, and from ore to shale fuel, the world wants it.

Much demand for mining equipment come is coming from Australia – one of China’s key trading partners. Australia wants heavy excavating, moving and crushing machinery. This trend is likely not only to continue but to increase dramatically.

 

Pacific Rim to favour the home market

The recent cyclone and flooding in Queensland, Victoria and New South Wales, has increased demand for plant and machinery in Australia. The clean-up operation, coupled with increased demand for mined materials means that Australia is now buying strongly.

Recent tragic events in Japan are expected to set back manufacturing in the country, although it is hard to predict for how long. It is anticipated that an inability to supply certain equipment, will lead to a market shortage and push up prices.

The Japanese home market will put huge demands on stocks of equipment for the rebuilding programme, the ripples of which will be felt across the global economy. The price of second-hand Japanese equipment is also expected to rise around the globe. This will become evident at the next Euro Auctions sale.

 

Eastern Europe still strong

Large construction and roadway projects in Poland are keeping machine operators, hire companies and contractors busy, with many organisations buying plant and machinery for that market.

Poland has always maintained a good presence at auction and players from that market are interested in a complete cross section of plant and machinery with the emphasis being on earth moving equipment.

Meanwhile, Russia is back buying plant and machinery after an absence of about two years.

 

US shortage

The US market is experiencing a shortage of equipment. They are still producing machines, but not in a capacity that is satisfying the demands of the home market.

Consequently, US buyers are now in Europe looking for stock and favouring the pound as opposed to the euro.

American buyers have become more apparent at auction in the past three months after an absence of some 12 to 18 months. Buyers from the US are looking for large heavy mining equipment for the home open-cast coal and iron ore extraction market, as well as for the oil sands of Alaska.

A new trend in the market is the extraction of shale gas from vast reserves in the US. There have been predictions that shale gas could break the dependency of the US on the Middle East for oil. In the US, big dump trucks for the contracting market are always on buyers’ shopping lists.

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